How to prepare for your home closing
You’ve found the right home that checks all the boxes. You’ve made an offer that’s been accepted by the seller, and your mortgage loan has been approved by underwriting. You’re almost at the finish line — but you’ll need to close first. Which means — what exactly?
Closing is the final step in the home buying process, a date when legal documents are signed, the transaction is finalized, and ownership is officially transferred from the seller to the buyer. It usually occurs on a single day in one location. But it remains the most crucial day on your home buying calendar, and it often is scheduled for a date 30 to 45 days after the offer has been accepted.
“At closing, the seller transfers the property’s deed to the buyer, and the buyer completes the necessary paperwork. This process typically takes at least 20 minutes, during which the closing agent or attorney will explain all the relevant documents,” says Chris Baylon, acquisitions manager for Texas Property Deals LLC.
The actual closing procedure is highly regulated by both state and federal governments to ensure fairness and legality. That’s why closings typically occur either at a title company office or through an attorney’s office, depending on the state where the property is located.
“Closing payments are made through the title company or attorney, who then disburses funds only after all aspects of the sales contract are fulfilled,” continues Baylon. “The original closing date is typically set within the purchase offer or contract. For instance, if the contract stipulates a 30-day closing period from the date it’s put under contract, that’s generally when the closing will occur, barring any amendments or extensions.”
Closing is also the time when you’re expected to pay your share of closing costs, which can often equate to 2% to 5% or more of your loan amount. According to Shereen Berlin, a Realtor with Coldwell Banker in Boston, your closing costs can include:
• The down payment, which typically ranges from 3% to 20% or more, depending on the loan type.
• Loan origination fee, charged by the lender, which covers the administered costs of processing the loan — usually around 0.5% to 1% of the loan amount.
• Appraisal fee, which can range from $300 to $500.
• Home inspection fee, an optional expense that can set you back $300 to $500.
• Title search and insurance. “Title companies charge for searching public records and providing insurance. The costs can range from $700 to $1,000 or more,” Berlin notes.
• Escrow fees, which cover the services of the escrow company that facilitates the closing process, costing $500 to $700 on average.
• Recording fees, which pay for officially recording the home sale with local authorities, ranging from $50 to $500.
• Prepaid property taxes and homeowners’ insurance. “Buyers may need to prepay their property taxes and homeowners’ insurance for a few months, depending on the loan requirements,” she adds.
• Private mortgage insurance or a mortgage insurance premium if your down payment is less than 20% and the loan requires this.
“To facilitate a smooth closing process and ensure timely completion, buyers should maintain clear-cut communication with all involved parties, properly submit required documentation to their lender, attend inspections and appraisals, review the closing disclosure carefully, secure homeowner’s insurance in advance, conduct a final walk-through of the property, ensure funds are readily available for closing costs, and be flexible with the closing date suggested,” continues Berlin.
Remember to show up on time for the closing and bring your photo ID and any other documentation requested.
“Let the closing company know as early as possible if you cannot attend the closing in person so they can accommodate you differently, such as via e-signing,” recommends Klaus Sinn, a Realtor with eXp Realty in Palm Beach, Florida. “If you have someone else closing for you, such as with a power of attorney, inform the closing company and lender and be sure they approve the power of attorney.”